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Aneal Basi (L), Dave Basi (centre left), his Lawyer Michael Bolton (centre right) and Bob Virk (R) leave BC Supreme Court October 18, 2010.John Lehmann/The Globe and Mail

Auditor-General John Doyle can't do his job unless his office is given full access to government files, including those covered by cabinet or solicitor-client privilege, the Supreme Court of British Columbia has heard.

If some documents can be put out of reach because of confidentiality concerns, then "we'll never be able to audit anything," Vancouver lawyer Louis Zivot said on Monday as he opened arguments for the Auditor-General's office in an unusual case that pits one branch of government against another.

In the action, the Auditor-General's office is seeking an order that would give its investigators authority to review all the records related to the government's special indemnity program, which pays the legal fees of individuals not covered by union or public-service agreements.

The Attorney-General's office is arguing it has released all the files it has, but some material is held by independent lawyers under contract to government, and that material can't be released unless the third parties have signed waivers.

The Auditor-General began to investigate the special-indemnity program after a public uproar erupted in 2010, when the government agreed to pay $6-million in legal fees for Dave Basi and Bob Virk. The fees were paid even though the two ministerial assistants had pleaded guilty to fraud and breach-of-trust charges.

The prosecution of Mr. Basi and Mr. Virk cost the government $18-million in total and the public has never been given a full accounting of where all the money was spent – and why.

Mr. Doyle's office is looking at the entire special-indemnity program, which, since the 1980s, has paid the legal fees of more than 100 individuals, but the focus is on the Basi-Virk case because of its high profile and the unusually high fees paid.

Mr. Zivot told court that of the 100 individuals who have special-indemnity files, 28 have agreed to waive solicitor-client privilege, allowing auditors to see their privileged documents.

But Mr. Basi and Mr. Virk have agreed only that access can be given to files that the government has in its possession. That partial waiver means the Auditor- General can't get files held by two private lawyers, who were hired by the government to be third-party reviewers of the legal-fee payments.

"One of the things the Auditor-General wants to know is was this control [by the reviewers] an effective control?" Mr. Zivot said.

He said denying access to files covered by confidentiality agreements hamstrings the Auditor-General. And he argued that when the Auditor-General's office was established, the legislation stated auditors would get access to "all documents" needed for reviews.

"It wasn't the intention of the legislature. . . to shield from review matters such as these," he said of the special-indemnity cases.

Mr. Zivot described the Auditor-General as "sort of a watchdog for the public purse," and said he needs unrestricted access to all files in order to function properly.

Conservative MLA John van Dongen, who has intervenor status in the case, said it is troubling to hear the Auditor- General isn't getting all the documents his investigators need.

"It's very frustrating," he said outside court. "It's important the Auditor-General has the full and unfettered access that is intended under the Auditor General Act."

He said the case, which is to continue throughout the week, is important because the special-indemnity program appears to have developed without much control.

"The special-indemnity program is one that has evolved over time with little elected involvement," Mr. van Dongen said.